MEDIA STATEMENT ON THE CIPRO/ VALOR IT TENDER BY THE MINISTER OF TRADE AND INDUSTRY DR ROB DAVIES, February 4 2011

1. the dti has noted consistently misleading reports in the media on the matter of an alleged "settlement" between it and Valor IT and wishes to issue the following clarification.

BACKGROUND

2. As part of a general information communications technology (ICT) upgrading exercise, the firm Valor IT concluded an Enterprise Wide Content Management System Implementation Agreement with the Companies and Intellectual Properties Office (CIPRO) during March 2009.

3. After certain information was brought to the attention of the dti that the tender was awarded irregularly investigations were commissioned through the Auditor General (AG) as well as the Specialised Services Group (SSG) respectively. The AG reported a number of irregularities in awarding of the ECM tender and also called on Cipro's accounting officer (the Director General of the dti) to investigate further. The matter was also interrogated by SCOPA which reported to Parliament.

4. It was in the light of these processes that the dti decided that it had no option other than to terminate the tender on the grounds that it was awarded irregularly and that it failed to meet the principles of fairness and transparency as outlined in Section 217 (1) and Section 195 of the Constitution of South Africa.

5. Consequently, the Director General as Accounting Officer for CIPRO terminated the contract between CIPRO and Valor IT on 10 June 2010.

6. In order to ensure proper and fair procedure before termination, Valor IT were afforded an opportunity by the Director-General to provide reasons why they believed the contract should not be terminated before a decision to terminate was taken. In a letter to the company, the Director General provided Valor IT with a summary of the findings of the investigations and the reasons why he was of the view that the contract should be terminated.

7. Matters that the dti considers to require further investigation by criminal and other spesialised enforcement authorities has been referred to such authorities.

8. On 15 June 2010, Valor IT brought an interim interdict on an urgent basis against the Minister of Trade and Industry, the Director-General of Trade and Industry, CIPRO and the CEO of CIPRO, seeking to prevent them from:

a) Implementing the decision of the Director-General to cancel the ECM Tender awarded to Valor IT.
b) Removing the employees of Valor IT from any of CIPRO's sites;
c) Preventing Valor IT from continuing with the implementation of the ECM contract; and
d) Appointing any other service provider to continue with the implementation of ECM contract concluded between Valor IT and CIPRO subsequent to the award of the ECM Tender.

9. Valor IT had requested the interim interdict to be granted pending the finalisation of a review application to be brought by the company, against the Minister, Director-General of Trade and Industry, CIPRO and CEO of CIPRO. The application was heard on 25 November 2010 but was not finalised as the parties were requested by the presiding judge to consider settling the matter in the public interest.

10. Pursuant to this request the team of lawyers that handles this matter on behalf of the dti entered into negotiations with Valor IT's legal team. As the terms presented by Valor IT's legal team were considered by the principals to be unreasonable and contrary to the public interest principles, a settlement could not be reached. The matter is therefore still pending before the North Gauteng High Court and the parties will have to revert to the court to conclude this matter if Valor IT  wishes to continue with this court action.

11. There is no settlement, as such would have been evident by a sign deed of settlement that neither Valor IT or the dti are in possession of. Acting on both legal advice and advice of the Auditor-General's office, the dti could not find any reasonable grounds or any legal basis to pay further money to Valor IT.

12. As pointed out earlier, the forensic investigation by both the Auditor-General and an independent firm instructed by the dti advised that the awarding of the tender had been irregular. To re-iterate; the dti maintains that it acted within its rights, and in the public interest in terminating the ECM contract.

13. Against this background, the dti has noted the unfortunate attempt to use the media to compel the dti into a settlement that is based on conditions and demands that are not in the interest of the dti or the public that the dti serves. the dti maintains that settlement on the terms that Valor IT wanted would not have been in the public interest and that it would have undermined the very principles that the dti sought to uphold when a decision to terminate the ECM contract was taken.

14. Lastly, the operations at CIPRO are improving as a result of the initial phase of the replacement of its infrastructure and other ICT interventions. The CIPRO website has been significantly stable despite the high volumes it's experiencing due to annual returns lodgements. For example on Tuesday, 1 February a total of above 13 000 transactions were processed with the website still being stable. This is twice the normal average daily transactions. The better performance of the website is being acknowledged by those who have been regularly working with CIPRO.

To further enhance the operational efficiency of CIPRO there is now an effort to maintain and support the current legacy systems. The developer of the current system (Waymark) has been engaged to ensure that:

• Current applications are further stabilized further
• Enhancements are made to improve the database security and reduce any fraud attempts. As you would know CIPRO has been dogged by a few cases of hijackings over the past few months. This highlighted the need for strengthened security measures to further protect the database. Although the electronic CM29 appear to have been enhanced the manual applications are now being reviewed. The upgrading of this current system will allow for the Cipro operation to continue effectively and leading into the transition into the new Companies Commission.

Statement issued by the Communication and Marketing, the DTI, February 4 2011

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